Why there is no single oil price

The news says oil rose two per cent. Which oil?

There are two headline crude prices, and they disagree every single day. WTI is light sweet crude delivered into pipelines at Cushing, Oklahoma. Brent is light sweet crude loaded onto ships in the North Sea. Similar molecules. Different places, different delivery mechanics, different buyers - and therefore different prices.

The spread is information, not noise

Most of the time the two trade within a few dollars of each other, and the difference quietly reports the cost and constraint of moving oil between the middle of America and the sea. When that plumbing breaks, the spread stops being quiet. In 2011, rising US production flooded into Cushing faster than pipelines could take it out, and landlocked WTI traded more than $20 below Brent for long stretches. Same news, same global oil market, twenty dollars apart - because place is part of the instrument.

This is the single most useful idea in this entire track. A commodity price is a price for a specific thing at a specific place for a specific month. Change any of the three and you are looking at a different instrument. Almost nobody teaches this, and traders who miss it spend years confused about why their chart disagrees with the news.

It is not just oil

US natural gas and European natural gas are the same molecule on different continents, and in 2022 the European price briefly traded near ten times the American one. No pipeline connects them; liquefied gas shipping was maxed out; so there was no arbitrage left to force them together. Wheat splits into Chicago soft red winter, Kansas hard red winter and Minneapolis spring - different plants, different protein, different contracts.

Gold is the deliberate exception. It is chemically identical everywhere, cheap to move relative to its value, and vaulted rather than consumed - so one global price holds to within pennies. Gold behaves like a currency wearing a commodity costume, and that difference runs through the whole track.

What this means for you

Every commodity chart, CFD and news headline references one specific benchmark, and the first question to ask of any instrument is: which one? A 'crude oil' CFD is a WTI contract or a Brent contract - the broker's page says which - and the two can move differently on the same day for entirely mechanical reasons.

There is no single oil price. Once that stops sounding strange, you are thinking like a commodities trader.